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Computer equipment was acquired at the beginning of the year at a cost of $54,500. It had an estimated residual value of $4,100 and an estimated useful life of five years. Determine the (a) depreciable cost, (b) straight-line rate, and (c) annual straight-line depreciation.

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msillitti

Answer:

a.$50,400

b. 20% depreciation per year

c. $10,080 per year

Explanation:

a) The depreciable cost is the total purchase cost minus the residual value:

  • $54,500-$4,100= $50,400

b) The straight -line rate is the rate of depreciation per year. Since here the usefull life is 5 year, the depreciation rate is 1/5 per year =0.2 per year

= 20 % per year

c) The annual straight-line depreciation is the depreciable cost multiply by the depreciation rate:

Annual straight-line  depreciation= 0.2*50,400= $10,080

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